NCLAT Delhi: CIRP Can’t Be Modified On Project Basis On Request Of Financial Creditor When CIRP Is Against Company
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, New Delhi comprising of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), dismissed an application filed in Kotak Mahindra Bank Ltd. vs. Resolution Professional of Universal Buildwell Pvt. Ltd. to confine the Corporate Insolvency Resolution Process (“CIRP”) filed by Kotak Mahindra...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, New Delhi comprising of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), dismissed an application filed in Kotak Mahindra Bank Ltd. vs. Resolution Professional of Universal Buildwell Pvt. Ltd. to confine the Corporate Insolvency Resolution Process (“CIRP”) filed by Kotak Mahindra Bank Ltd. (Financial Creditor) only in respect of one project of Universal Buildwell Pvt. Ltd. (Corporate Debtor).
The Appellate Tribunal held that when the NCLT initially ordered the commencement of insolvency proceedings against the Corporate Debtor based on the application of the Financial Creditor, it could not have modified the initiation of CIRP by confining it to only one project.
Background Facts:
On 03.07.2018, the CIRP was initiated against the Corporate Debtor. The Financial Creditor had filed an application before NCLT, New Delhi to confine CIRP only in respect of the Universal Aura Project and that the other projects of the Corporate Debtor viz. Universal Business Park, Universal Prime, Universal Greens, Universal Square, Market Square, Pavilion, and Universal Trade Tower as also any other project/asset of the Corporate Debtor must be released from the rigors of the Code.
The Financial Creditor by placing reliance on Flat Buyers vs. Umang Realtech Pvt. Ltd. and Ashok Kriplani Resolution Professional of Dreamz Infra India Ltd. vs. Venugopal Swamy Temple & Ors. submitted that project-wise CIRP is a fact that has been utilized for different Corporate Debtors. Further, since the Financial Creditor was confined to one project, thus, the NCLT should have confined the CIRP with regard to one project only.
Further, it contended that project-wise CIRP would be more beneficial for the maximization of assets of the Corporate Debtor.
NCLAT Verdict:
The Principal Bench of the NCLAT in New Delhi dismissed the application by the Financial Creditor. It held that when the NCLT initially ordered the commencement of insolvency proceedings against the Corporate Debtor based on the application of the Financial Creditor, it could not have modified the initiation of CIRP by confining it to only one project.
The Appellate Tribunal observed that NCLT New Delhi rightly rejected the application since the previous order cannot be modified at the instance of the Financial Creditor.
Case Title: Kotak Mahindra Bank Ltd. vs. Resolution Professional of Universal Buildwell Pvt. Ltd.
Case No.: Company Appeal (AT) (Ins.) No. 1000 of 2021
Counsel for Financial Creditor: Ms. Nidhi Mohan Parashar and Mr. Manikya Khanna, Advocates
Counsel for Corporate Debtor: Mr. Swapnil Gupta, Advocate